Henry Hazlitt may never be hailed as one of the world's greatest economists, but judging from today's dominant theories, neither would Ludwig Von Mises. Indeed, these disciples of Adam Smith hold little that would appeal to today's economists except for one disturbing fact: they have been predominantly right in exposing the fallacies and consequences of socialism and central planning.
Henry Hazlitt's short book, ECONOMICS IN ONE LESSON may never be hailed as a classic, but neither would Mises’ HUMAN ACTION. Galbreath s THE NEW INDUSTRIAL STATE would grab all the honors, even though it is predominantly wrong.
If you want to find a book that gives a quick view of what economics is about, don't look in your local book store. The book needed most by today's thinking American is not going to be there. Yet, Hazlitt's ECONOMICS IN ONE LESSON is truly a classic of economic literature.
Hazlitt expounds on one example, the broken window that brings business to the glazier and consequently to others who deal with him. Hazlitt uses this example to show how people can convince themselves that the vandal who breaks the window is providing a service by making countless transactions necessary. But the broken window analysts neglect the fact that the owner of the window is out the cost of the repair, so that the gain for the glazier is a genuine loss to the owner.
Hazlitt takes the broken-window fallacy and shows how it applies to economic principles, and he shows how many economic analysts use the fallacy in justifying their own pet schemes. "...the broken-window fallacy, under a hundred disguises, is the most persistent in the history of economics." says Hazlitt.
For instance:
-Wars do not spur economic activity by making replacement of the goods destroyed necessary.
-Government spending does not cure economic ills but diverts funds to generally non-productive activities.
-New machinery introduced into industry does not create unemployment.
-Full employment schemes launched by government end in more unemployment.
-Minimum wage laws assure that those they are designed to help do not get jobs.
Hazlitt's style is so much to the point that he has managed, in a minimum number of pages, to destroy virtually every fallacy adhered to by John Kenneth Galbreath in all of his voluminous writings. In fact, Hazlitt refutes Galbreath in one breath: "Economics, as we have now seen again and again, is a science of recognizing secondary consequences. It is also a science of seeing general consequences. It is the science of tracing the effects of some proposed or existing policy not only on some special interest in the short run, but on the general interest in the long run." (The Lesson Restated, Page 135)
ECONOMICS IN ONE LESSON is a defense of reason in economics. As a consequence of his approach Hazlitt defends "the Forgotten Man ... He is the man who is never thought of. He is the victim of the reformer, social speculator and philanthropist (Quotation from William Graham Sumner.)"
The reader of ECONOMICS IN ONE LESSON will quickly learn that he is that Forgotten Man.
Showing posts with label Economics in One Lesson. Show all posts
Showing posts with label Economics in One Lesson. Show all posts
Wednesday, June 3, 2009
Sunday, March 29, 2009
How to See the Unseen
I’m not trying to be mystical here. I was recently re-reading Henry Hazlitt’s “Economics in One Lesson” and was inspired by his discussion of the advantage that liberals have when they recommend large spending programs.
“…there is a…factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.
In this lies the whole difference between good economics and bad. The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.”[1]
Hazlitt accuses progressives of pointing to a problem and then recommending government spending as the solution; focusing on the problem but ignoring the “unintended consequences” of government action. He says elsewhere that you can easily point to the job or money that the government beneficiary receives but you cannot point to what was lost because it does not exist. The loss is in the products you could not buy and the job that was not created because the money went to the government.
I would like to suggest a way that you can see the unseen consequences of government action as they affect you personally.
Take a look at your latest tax filing form and identify how much money you paid through out the year on taxes. Then ask yourself what you would have bought with that money. Then take a trip to a store where that item is sold and find it on the store shelf. Now you can see with your own eyes what you have lost, what you do not have. Is it a new Recreational Vehicle, a new Home Theater, hundreds of books you could have read or even a new Jacuzzi? Look at them in the store; spend a few minutes contemplating what you would be doing if you had that item in your possession right now; how much better your life would now be with that item. Then realize that this item has been taken from you by the government.
If you want to get even more wistful, look at the latest report you received from the Social Security Administration detailing how much you have paid into that program. Depending on the number of years you’ve paid into the system, I’ll bet you could have bought a much nicer house; or perhaps several vacations over the years, maybe even a real pension that isn’t threatened by extinction. Now go to an online Real Estate website and look through some houses whose prices match that amount of money; or look at some travel agency brochures and figure out how many places you could have visited with that money. Savor the pictures of the sites you were not able to visit.
Some would say that the exercise I am recommending is a selfish way of looking at the issue and that you should instead consider the good that the government has done with your money. Rather, I would argue, read an article on government waste and identify a program that has been a boondoggle or that benefited a Congressman by setting up a phony business so he (through proxies) could pocket your money. Or learn about how much money was paid by government to friends or relatives of politicians and you’ll see the harm that has been done to you (I’d love to get your comments on what you have learned in this exercise).
Hazlitt was a classical economist who taught his generation to look at all aspects of a government program, not just the beneficiaries but the harm that is done to the people who earned the money. Classical economists were not blind to the fact that the government was violating the individual and property rights of some people in order to give benefits to their voting blocks. Their arguments were critical of socialist ideas but they missed the truth that the government did not have the moral right to take the property of citizens. Working hard in order to live a better life, educating yourself so you can earn more money, are both moral actions and anyone who decides to engage in such acts is a moral agent, a good person. It is your moral right to better yourself and it is immoral of the government to violate your right to a better life. Well, look with your own eyes at the benefits you have been denied; the very benefits that have been forbidden to you; benefits that would enable you to have a better life and also to create more jobs so other people can live better lives.
You did the work, did you not? You exerted your energy and your thinking in order to make this money, did you not? Why should anyone take it from you? Who gave Barack Obama and Congress the authority to expropriate your property? Who gave them the moral authority, the moral right, to decide what to do with your money, money that would not have been created without your effort? The answer is that there is no such authority, no such right held by any man anywhere to decide what to do with your earnings and property.
Now that you’ve seen the unseen, I hope you agree with me that the government has no authority to take your property. I hope you also agree that you need to take a stand on the issue of government spending. You need to seek out other Americans and communicate to as many people as possible your refusal to let the government take over your life. Remember the Boston Tea Party.
[1] Economics in One Lesson, Henry Hazlitt, Three Rivers Press
“…there is a…factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.
In this lies the whole difference between good economics and bad. The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.”[1]
Hazlitt accuses progressives of pointing to a problem and then recommending government spending as the solution; focusing on the problem but ignoring the “unintended consequences” of government action. He says elsewhere that you can easily point to the job or money that the government beneficiary receives but you cannot point to what was lost because it does not exist. The loss is in the products you could not buy and the job that was not created because the money went to the government.
I would like to suggest a way that you can see the unseen consequences of government action as they affect you personally.
Take a look at your latest tax filing form and identify how much money you paid through out the year on taxes. Then ask yourself what you would have bought with that money. Then take a trip to a store where that item is sold and find it on the store shelf. Now you can see with your own eyes what you have lost, what you do not have. Is it a new Recreational Vehicle, a new Home Theater, hundreds of books you could have read or even a new Jacuzzi? Look at them in the store; spend a few minutes contemplating what you would be doing if you had that item in your possession right now; how much better your life would now be with that item. Then realize that this item has been taken from you by the government.
If you want to get even more wistful, look at the latest report you received from the Social Security Administration detailing how much you have paid into that program. Depending on the number of years you’ve paid into the system, I’ll bet you could have bought a much nicer house; or perhaps several vacations over the years, maybe even a real pension that isn’t threatened by extinction. Now go to an online Real Estate website and look through some houses whose prices match that amount of money; or look at some travel agency brochures and figure out how many places you could have visited with that money. Savor the pictures of the sites you were not able to visit.
Some would say that the exercise I am recommending is a selfish way of looking at the issue and that you should instead consider the good that the government has done with your money. Rather, I would argue, read an article on government waste and identify a program that has been a boondoggle or that benefited a Congressman by setting up a phony business so he (through proxies) could pocket your money. Or learn about how much money was paid by government to friends or relatives of politicians and you’ll see the harm that has been done to you (I’d love to get your comments on what you have learned in this exercise).
Hazlitt was a classical economist who taught his generation to look at all aspects of a government program, not just the beneficiaries but the harm that is done to the people who earned the money. Classical economists were not blind to the fact that the government was violating the individual and property rights of some people in order to give benefits to their voting blocks. Their arguments were critical of socialist ideas but they missed the truth that the government did not have the moral right to take the property of citizens. Working hard in order to live a better life, educating yourself so you can earn more money, are both moral actions and anyone who decides to engage in such acts is a moral agent, a good person. It is your moral right to better yourself and it is immoral of the government to violate your right to a better life. Well, look with your own eyes at the benefits you have been denied; the very benefits that have been forbidden to you; benefits that would enable you to have a better life and also to create more jobs so other people can live better lives.
You did the work, did you not? You exerted your energy and your thinking in order to make this money, did you not? Why should anyone take it from you? Who gave Barack Obama and Congress the authority to expropriate your property? Who gave them the moral authority, the moral right, to decide what to do with your money, money that would not have been created without your effort? The answer is that there is no such authority, no such right held by any man anywhere to decide what to do with your earnings and property.
Now that you’ve seen the unseen, I hope you agree with me that the government has no authority to take your property. I hope you also agree that you need to take a stand on the issue of government spending. You need to seek out other Americans and communicate to as many people as possible your refusal to let the government take over your life. Remember the Boston Tea Party.
[1] Economics in One Lesson, Henry Hazlitt, Three Rivers Press
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